Econ 102 Week 1 Economics Paper
Megan Stansmore and Ivan Rodriguez Required Assignment #2
Economics 102
Professor Makpayo
4/24/12
1a. The maximum amount of money that the initial deposit can be expanded to is $50,000. With the use of the money multiplier, we were able to use the formula by taking the reciprocal of the reserved ratio and multiplying it by the initial deposit. MM = MM = = 10 5000 10 = $50,000
2a. When the Federal Reserve decides to double the required reserve rate; the maximum amount of money that the initial deposit can be expanded to is $25,000. Again, we used the money multiplier formula to find our answer.
MM = MM = = 5 5000 5 = $25,000
3. The total money created and total reserves in 1 and
Economics 102
Professor Makpayo
4/24/12
1a. The maximum amount of money that the initial deposit can be expanded to is $50,000. With the use of the money multiplier, we were able to use the formula by taking the reciprocal of the reserved ratio and multiplying it by the initial deposit. MM = MM = = 10 5000 10 = $50,000
2a. When the Federal Reserve decides to double the required reserve rate; the maximum amount of money that the initial deposit can be expanded to is $25,000. Again, we used the money multiplier formula to find our answer.
MM = MM = = 5 5000 5 = $25,000
3. The total money created and total reserves in 1 and